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Is a super sports-betting upset brewing?

In its early stages, NCAA, et al. v. Christie, has taken on the appearance of Super Bowl XXXVI. As in Super Bowl XXXVI, the NCAA, NFL and other sports leagues, who filed the case to prevent Governor Chris Christie from establishing legal and regulated sports betting in New Jersey, resemble the St. Louis Rams and their coach, Mike Martz.

St. Louis possessed superior players such as quarterback Kurt Warner, running back Marshall Faulk, and wide receivers Isaac Bruce and Tory Holt. Martz’s offensive players were so talented and potent, particularly in the passing game, that they were known as “The Greatest Show on Turf.” Like the Rams, the NFL and its fellow plaintiffs possess the superior legal “player”—the Professional and Amateur Sports Protection Act or “PASPA”—which on its face prohibits Governor Christie and New Jersey from establishing sports betting in New Jersey.

On the other hand, in Super Bowl XXXVI, New England possessed a superior coach, Bill Belichick, and superior design. By using Belichick’s superior design, the Patriots overcame St. Louis’ superior players, defeated the Rams, 20-17, and pulled off one of the greatest upsets in NFL history. According to the late David Halberstam, Belichick designed the upset by daring the pass-happy Martz to run the football, rather than throw it. “[T]he Rams players were all on the sidelines during the second half, screaming at the coaches that the Patriots were playing five and six defensive backs, that they had to run the ball, that the run was there every time,” ESPN analyst Ron Jaworski told Halberstam in The Education of a Coach. “But Martz was telling them … ‘I’m going to win it my way.’” “In that sense,” Halberstam wrote, “Jaworski believed, Belichick outsmarted the very bright Rams coach Mike Martz, forcing Martz to stay with an offense that was not going to work that day, but that he was more comfortable with.”

Constitutional law genius Theodore Olson, a lawyer with Gibson, Dunn & Crutcher in Washington, D.C., is playing the Belichick role in NCAA, et al. v. Christie. Based on the brief Olson and his legal team filed on behalf of the Governor that asks the court to dismiss the NFL’s complaint against Christie, Olson and his legal team is seeking to force the NFL into the same uncomfortable position into which Belichick forced Martz. Just as Martz refused to run the ball in Super Bowl XXXVI because he was uncomfortable doing it, the NFL appears to continue to refuse to argue that Governor Christie should not be allowed to establish sports betting in New Jersey without providing the NFL a share of the commissions that will result from the the sale of the bets simply because the NFL is uncomfortable doing it.

In their complaint, the NFL and other leagues alleged that their “reputation and goodwill” will be harmed by the establishment of sports betting in New Jersey because such betting will undermine “the public’s faith and confidence in the character of amateur and professional team sports” by “fostering suspicion that individuals and final scores of games may have been influenced by factors other than honest athletic competition.” On September 7, Olson and his legal team flatly called that notion into question by filing a motion to dismiss the NFL’s lawsuit and claiming that the NFL’s allegation was so ridiculous that the NFL does not even have standing under Article III of the United State Constitution to ask the federal court to decide the case on the merits. “The League’s vague claim of injury to ‘reputation and goodwill’ does not satisfy Article III’s injury-in-fact requirement,” Olson and his legal team wrote on behalf of Governor Christie. “It is not just conjectural, but deeply implausible: Sports gambling today enjoys a vast, but mostly illegal, market. With the blessing of the federal government, nearly $3 billion is wagered on sporting events each year in Nevada. But an estimated $380 billion is wagered each year on sporting events through illegal and offshore channels. Yet the Leagues’ complaint alleges no facts that would suggest that this nearly half-trillion-dollar pre-existing industry has harmed the ‘reputation’ or ‘goodwill’ of the Leagues.”

In opposing Olson’s motion to dismiss, the NFL’s legal team abandoned its allegation that it would suffer reputational harm and pointed out that “[t]he interest for constitutional standing need only be an ‘identifiable trifle,’ and it is enough that the athletic contests on which New Jersey intends to permit gambling are plaintiff’s games.” In his October 9 reply, Olson and his legal team pounced on what he called the NFL’s “audible.” “It is true, as the Leagues refrain, that even an ‘identifiable trifle of injury’ is sufficient, for even a penny suffices for the Article III injury-in-fact,” Olson and his legal team replied. “But a penny is a real injury, and the Leagues’ complaint pointedly does not allege that New Jersey’s Sports Wagering Law threatens them with the loss of a penny or any other trifle.” This is simply another way of saying what the QuantCoach said in his Betting on the NFL Goes on Trial series: The NFL should stake its claim to a share of the billions of dollars of commissions that will be generated by legal sports betting beyond the Nevada border as compensation for its capital investment in the games upon which bets will be placed.

Although the NFL has not yet made this argument, Olson and his legal team already have hedged against the NFL moving the federal court to amend the complaint to do so. Olson’s hedge is the argument that PASPA “simply does not grant the Leagues any individual substantive right.” “The Leagues alternatively argue that New Jersey’s legalization of sports wagering would injure the Leagues by violating the ‘right’ PASPA supposedly granted them to be ‘free of the spread of state-sponsored gambling,’” Olson and his legal team wrote. “That PASPA does not grant such a right is confirmed by the dramatic growth of the legal sports wagering market in Nevada since PASPA’s enactment, and the Leagues claim no ‘right’ against the spread of sports wagering. Moreover, the Leagues have no response to the undeniable fact that ‘PASPA did not alter in any way the legal relationship between the Leagues and the States.’” The NFL may not have a response to the contention that PASPA did not alter the legal relationship between the NFL and the states, but the QuantCoach does.

First, Olson and his legal team are simply wrong as a matter of fact that “dramatic growth” in sports betting occurred in Nevada after the enactment of PASPA in 1992. Rather, as Roxy Roxborough, Mike Rhoden, and David Scott detailed in Sports Book Management: A Guide for the Legal Bookmaker, the dramatic growth in sports betting in Nevada occurred before the enactment of PASPA due to changes in federal tax laws that were enacted in 1974 and 1983. By the time Congress enacted PASPA in 1992, the Nevada sports betting market was essentially mature and the NFL’s acceptance of Nevada’s sale of sports bets in exchange for the additional interest the NFL’s games received from the betting was a good deal for both Nevada and the NFL.

Second, as stated in Part 3 of Betting on the NFL Goes on Trial, prior to the enactment of PASPA, the NFL did not have have any substantive legal right in its games when Delaware used those games as a component part in that state’s sports betting scheme. The federal court recognized as much in National Football League v. Governor of the State of Delaware, in which Judge Weir held that “[w]hile Courts have recognized that one has a right to one’s own harvest, this proposition has been not been construed to preclude others from profiting from demands on collateral services generated by the success of one’s business venture.” PASPA changed this legal relationship between the NFL and the states by providing the NFL with the functional equivalent of a patent—a substantive negative right—that arms the NFL with a shield that protects the NFL’s “right to its own harvest” in the event that a state—such as New Jersey—seeks to grow sports betting in a field outside of Nevada’s geographic borders. However, to make this argument, the NFL must assert that it is entitled to a share of the commissions that sports betting in New Jersey will generate. Theodore Olson has practically dared the NFL to assert a claim to that share of the commissions just as Bill Belichick dared Mike Martz to run the ball in Super Bowl XXXVI.

In Governor Christie’s reply brief, Olson and his legal team concede that PASPA is constitutional and serves “the legitimate purpose of permitting sports organizations to bring a federal action when they do suffer an injury that is ‘concrete and particularized,’ and ‘imminent, not conjectural or hypothetical.” Further, even Olson would have to concede that an NFL claim that it would lose a share of the billions of dollars in commissions that will be generated if sports betting grows beyond Nevada’s borders constitutes a “concrete and particularized” injury to the NFL. “This requirement, as the Leagues observe, ‘is not Mount Everest,’ but it does require [the NFL] to state specific allegations that, if true, would establish a real injury,” Olson and his legal team wrote in reply to the NFL’s arguments and in support of Governor Christie’s motion to dismiss. Olson is betting that the NFL simply will not make the specific allegation that it is entitled to a share of the commissions that will be generated from sports betting in New Jersey because, like Mike Martz in Super Bowl XXXVI, the NFL will find that choice too uncomfortable.

If Olson continues to win his bet, then the odds that at some point in the legal process Goveror Christie will win his bet and successfully establish sports betting in New Jersey will get shorter. In other words, it looks like a super sports-betting upset might be brewing in New Jersey.